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Authors: Hteik Tin Min Paing, Yan Lynn Region Head: Hteik Tin Min Paing
Editor: Praharsh Mehrotra
Illustration by Michelle Faith Lee
Introduction
After the 2015 General Elections and inauguration of the National League for Democracy (NLD) government led by Aung San Suu Kyi, everyone in and outside of Myanmar were hopeful of the prospects of Myanmar. However, after a five-year period of the NLD government, many long standing issues such as peace negotiations, constitutional reform, political and economic influence of the military remain unresolved while the Rohingya crisis undermined the image of the country and the reputation of Aung San Suu Kyi. The upcoming elections in November 2020 are also potentially receiving voter apathy amid rising Covid-19 cases, and NLD is less likely to win a majority again. With this complicated politics of Myanmar, the progress and setbacks of the NLD government in the last five years would provide some insights to understand more about the seemingly underperforming elected government and ongoing political situation in Myanmar.
Brief History
Since independence, Myanmar, formerly known as Burma, has been undergoing civil war or internal conflict. The military coup in 1962 denied the federal union the ethnicities desired and started the military state-building. The country was listed as one of the Least Developed Countries in 1987 due to the economic mismanagement of the government led by General Ne Win. In 1988, the people protested the government for months in the 8888 uprising which was brutally suppressed by the military. The military then took control of the country again and held multi-party elections in 1990. Although the NLD party won a landslide, the military voided the results and imprisoned many elected civilians including the Nobel Laureate Aung San Suu Kyi. Myanmar was under military dictatorship throughout the 1990s and 2000s. In 2008, the military-backed constitution was approved in a referendum which was denounced by the Human Rights Watch as a sham (“Burma: Referendum is a sham,”2008). The flawed elections were held in 2010 and a new government led by ex-military generals sworn in and started liberalization in 2011. The NLD contested in 2012 by-elections and won most seats, hence Aung San Suu Kyi entered national politics handing more credibility to Myanmar’s liberalization. In 2015 general elections, the NLD won a landslide victory and the previous government transferred power to the winner’s party which was the first time for Myanmar since independence (Lynn, 2015).
1. Progress
Public Sector Reform
The significance of this transition is that the elected civilians gained the control of the government since the military coup in 1962. However, the civilian control is not complete due to the constitution which reserved seats for the military in the parliament. The military is also fully in control of the three powerful ministries- Defense, Interior and Border Affairs. The constitution thus gives rise to a hybrid government with limited civilian control.
While the NLD’s attempts for constitution reform were not successful due to the veto from the military in the parliament, there was a significant public sector reform in 2018 which was the placement of the General Administration Department (GAD) into the Ministry of the Office of the Union Government. The GAD is the subnational public administration agency previously under the control of the Ministry of Home Affairs which effectively gives the military leaders in charge of nationwide administration (Lintner, 2017). This reform allows the civilian state and region chief ministers more discretion over GAD and provides the possibility of decentralization which could pave the way for peace and facilitate further democratic transition (Arnold, 2019).
Economic liberalization and Ease of Doing Business
After a slow start with a brief 12-point economic policy, the government made progress by enacting new laws such as Myanmar Investment Law in 2016 and Myanmar Companies Law in 2017. The new laws were enacted with the intention to invite further foreign direct investment (FDI) into Myanmar. Standardized application procedures for FDI, significant tax exemptions to foreign investors and better conditions for long-term real estate leases are key improvements that favor FDI (Matsui, 2017). In addition, the retail and wholesale sectors were opened up to foreign businesses and joint ventures for further liberalization in 2018 (Ko Ko & Chau, 2018). Hence, FDI approvals between October 2018 and January 2019 amount to the value of US$1.5 billion, which was a significant increase compared with US$832 million of the same period last year (Ko Ko, 2019). Due to the reform measures, the country was also ranked 165th out of 190 countries on the World Bank’s Doing Business 2020 rankings, becoming one of the top 20 reformers for the year (Htwe, 2019). Starting a business criteria showed significant improvement from 152nd to 70th within a year. Other areas of improvement are registering property and dealing with construction permits.
2. Setbacks & Challenges
The Power Struggle with the Military
One of the major challenges that gravely hampers the country’s progress has been its military-backed constitution. It allows the military to control key sectors of the economy and ministries such as Defense, Interior and Border Affairs. After more than 50 years of isolationist and authoritarian military rule, Myanmar still finds itself partially under the military control up to the present day. In order to remove the military veto, the parliamentary approval has to be more than 75%. However it is not feasible as 25% of the parliamentary seats are taken by the military personnel and makes it impossible to get approval votes of more than 75% (AlJazeera, 2020). As such, so long as the military refuses to give up its power, their constitutional veto remains impossible to be ruled out.
Attempts to modify the constitution have been met with repression which sometimes includes acts of violence by the military affiliates. One example is the assissination of the infamous lawyer Ko Ni in 2017, who was an adviser to the leader Aung San Suu Kyi and contributed a great deal towards amending the constitution (Lasseter, 2018).
Rohingya Crisis
The longstanding Rohingya crisis in the Rakhine region is one of the major challenges for the government of Myanmar. Whether the Rohingyas are one of the ethnicities of Myanmar is a controversial issue. They are not recognized as citizens in Myanmar according to 1982 Citizenship Law and widely believed to be illegal immigrants from Bangladesh (Blakemore, 2019). In 2017, the military operations in response to the attacks of Rohingya militants on police posts led to the exodus of more than 700,000 Rohingyas.
According to a Myanmar foreign investment official, the Rohingya crisis had a negative impact on foreign direct investments due to its effect on the country’s reputation (Geddie, 2018). Total foreign direct investments have dropped sharply from $6 billion in 2017 when NLD took office to $1.7 billion in 2018, the year after the eruption of the Rohingya crisis (The World Bank). As for the bilateral trade between the two countries, Myanmar and Bangladesh, the trade level has been fluctuating and dropping since 1990. The import from Bangladesh has dropped from more than $80 million in 2011-12 to $31 million in 2019 (Trading Economics).
In light of genocide allegations, EU has also threatened to reinstate tariffs on goods such as garments. The Everything But Arms (EBA) scheme allows developing countries access to EU markets without tariffs or quotas for every goods apart from weapons. Myanmar’s garment exports have benefited from the EU since the country became part of the programme since 2012. The garment revenues have increased from $900m in 2012 to $2.7bn in 2013 and $4.58bn in 2020 (Aung, 2020). With the warning from the EU to reinstate tariff on garment, this imposed a challenge to Myanmar’s economic growth post Covid-19.
The Rohingya crisis remains one of the most difficult challenges and setbacks to the democractic government. Counterintuitively, the conflicts and violence play in favour of the military by increasing its chance of regaining power due to the constitution which allows the army to take over the country under emergency legislation. The conflicts also drive away a great deal of FDI inflows and tarnish brand capital of Myanmar.
Underperforming Economy
After the formation of the government led by Aung San Suu Kyi, the United States lifted the trade sanctions imposed on Myanmar in 2016 (Brunnstrom, 2016). However, the economic growth under the NLD government fell short of expectations. Compared to the USDP (Union Solidarity and Development Party) government (2010 - 2015), the growth rate has decreased from 7% when NLD took office to 5.9% after one year (The World Bank). GDP growth has been fluctuating under the NLD government (2016-2020) as seen in the figure.
Figure: Real GDP Growth since NLD took Office in 2015 November
Source: The World Bank
During 2016 to 2019, the inflation rate was on average 6.8% and was the highest in ASEAN countries (The World Bank). This was mainly due to the sharp depreciation of the kyat, Myanmar currency, against the US dollar. Several factors such as rising imports which increase the demand for US dollars, weakening FDI inflows which are associated with the Rohingya crisis and black market currency manipulation. The country’s notoriously corrupted jade trading has been an extractive institution for the economy since billions of dollars worth of transactions are carried out under the shadow with little or no contribution to the taxes. In 2014, one investigation led to the finding that $6.2 billion worth of tax was lost through unauthorized transactions (Jones, 2019).
The NLD government has primarily focused on national reconciliation since it took office, and the economic reforms have been weakly implemented over the years. The interest rate for businesses stood around 10 to 13% per annum and only 3% of SMEs (small and mid-size enterprises) which make up more than 98% of all businesses in the country have managed to secure the funding (Central Bank of Myanmar amends lending rates 2019; Ko Ko, 2019). High interest rates, lack of financial documentation and collateral requirements have been major obstacles in securing loans (Ko Ko, 2019).
The economic reforms of the NLD government showed their effects of increasing the FDI only in recent years. Although the Covid-19 pandemic has brought down real GDP growth up to 0.7% in 2020, the economy is forecast to stage a rebound in 2021 and grow strongly again from 2022 onwards (Economist Intelligence Unit, 2020).
Conclusion
The NLD government claimed that it would strive to accomplish three main goals when it came to power in 2016. They are national reconciliation, economic development, and constitutional amendment. In terms of peace & reconciliation, as discussed above, there are still conflicts which impose many political and economic challenges on the country. Economically, the GDP growth and foreign direct investment during its term did not improve as expected and even declined in the first few years. Attempts to amend the constitution have been turned down by the military, and it is doubtful if such attempts would be successful in upcoming years. Despite its setbacks and challenges, the people in Myanmar still believe that only the NLD party led by the leader Aung San Suu Kyi would be able to lead the country towards further democratization and development. Despite many new parties registered to contend in the upcoming elections, it is forecast that the NLD party will win a large majority again (Economist Intelligence Unit, 2020). Hence, it is only a question of what is in the pipeline of the party for economic recovery plans, political stability and constitutional changes since the country will be facing even greater challenges brought about by the Covid-19 pandemic beyond 2020 elections.
Reference
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